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Govt Cracks Down on Mortgage and Foreclosure Scams

The Federal Government's crackdown on mortgage foreclosure fraud against is starting to yield results.

Yesterday, Attorney General Eric Holder announced the results of the Distressed Homeowner Initiative.

The initiative focused on fraudulent schemes targeting struggling homeowners, namely foreclosure scams and loan modification schemes.

The Distressed Homeowner Initiative resulted in 530 criminal charges and 285 District Court cases, filed across the country, reports the Baltimore Sun.

The initiative ran from October 1, 2011 to September 30, 2012. According to the press release from the Attorney General's office, the schemes involved a con artist contacting a struggling homeowner. The con artist would promise the homeowner that he could help prevent foreclosure for a fee.

A typical foreclosure scam would involve promises of avoiding foreclosure. In return, the distressed homeowner would pay a fee and sometimes even pass title on to the scammer.

The result could be total loss for the homeowner.

A loan modification scam, while not as damaging, would involve the scammer promising to convince the banks to lower the mortgage payments, the interest or even the principal. The homeowner would pay an upfront fee, often in the thousands, with little or no action taken on the part of the scammer.

Unfortunately for many homeowners caught in loan modification scams, there is little hope for a loan modification, even if the company contacts the bank. With loan modifications often requiring personalized documents, such as a hardship letter, a loan modification tends to be more successful if the homeowner contacts the bank directly.

Distressed homeowners should talk to a real estate attorney to figure out what options they have. There are many programs out there now-- government sponsored ones-- which could help struggling homeowners.

But as for paying any service to lessen the burden of a mortgage, homeowners should think twice.

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